How Much House Can You Afford

Tuesday, October 1, 2013

How Much House Can You Afford

When prospective homeowners think about buying a house, many only consider elements such as the size and style of the house, what kind of community they would like, and how far away it would be from their work or their children’s schools. Quite surprisingly, worrying about just how much house they can afford for some reason goes to the bottom of the list. But it shouldn't. Using a mortgage calculator in order to figure out how much “house” can be afforded is necessary so that a potentially enormous financial burden is not imposed on the new homeowner. Here is a list of tips you should take into consideration in order to stay out of monetary trouble.
Image credit: scanrail / 123RF Stock Photo

1. Determine how much your family has in net income

The working members of a household need to be accurate and honest when calculating exactly how much their net monthly income is. Most financial and housing experts assert that the housing cost should not be more than 30-33% of net income if a family calculates that the price of the home they're considering buying will cost them more than this amount. In such circumstances, they should be certainly not making the purchase because it's more than they can afford.

2. Write out a list of all expenses in your household

Moreover, a list that outlines in full all monthly expenses should be written up. If the amount can’t be sustained when a new higher housing payment is figured in then the family just won't have enough income to afford the house, it is necessary to buy a less expensive home.

3. See how much money is available to pay down

The more money put down, the lower the mortgage payments will be. The golden rule is about 20-23% down. If a family doesn't have this much for the particular house, they're interested in then they should reconsider their housing investment options in terms of choosing a cheaper home.

4. Find out what would have to be sacrificed in order to afford a house

If a family calculates, when they buy a home the monthly payment will be too much for them to be able to carry other necessary or even desirable costs in their household going then they will require finding a less expensive home. If buying a certain property means that the family will no longer be able to afford TV programming or the monthly Internet and telephone bills at all then they need to re-evaluate their home purchase.

5. Determine if the current job situation is safe for the long term

The principal income earners in a family need to determine whether their current jobs will be secured for a substantive time in the future. Otherwise, unemployment and lack of an emergency savings fund will make it almost impossible to continue to afford their new home. 

Author: Victoria M

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